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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 09/07/2021

A fall in mortgage interest rates and increased competition from lenders offers significant savings for those needing to remortgage or wanting to buy a new property. Lenders are now fighting to win more customers and as a result rates have reached the lowest levels ever seen at 0.94% for a two-year fixed rate remortgage.

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Data from the latest Moneyfacts UK Mortgage Trends Treasury Report shows there is now a greater choice of mortgages than there was during the past 16 months with 4,512 deals available, an increase of 269 on June 2021. This increased competition is across the market, with more deals available for those at 95% loan-to-value (LTV), increasing by 61 to 253 in June 2021.
Borrowers can now benefit from the lowest ever rates seen for a two-year fixed rate mortgage, with TSB and HSBC both offering an initial rate of 0.94%. Borrowers wanting to get these top remortgage deals will need to have a maximum LTV of 60%, a good credit score and easily meet the lender’s affordability and underwriting requirements. 

Those concerned about their credit score can check their credit score for free with Totally Money.

Will those needing to remortgage now get a better rate?

There are market leading rates available right now for those needing to remortgage at low LTVs. However not enough lenders have made great enough rate reductions to see a fall in the average rate across the market compared to averages seen in the last two years. For example, the average rate for a two-year fixed rate mortgage, taken in July 2019 was 2.49%, right now the average is at 2.55%. Rates have fallen this month , with rates in July dropping by 0.04%for two and five year fixed deals.

Eleanor Williams, Finance Expert at Moneyfacts, said:

“The level of choice available to those looking for a residential mortgage has risen substantially again between June and July, as volumes rose by 269 new products bringing the total available to over 4,500. Over the past six months alone availability has recovered by 1,619 - or 56% - and for the first time in over three years, we tracked improvements in choice across all the LTV brackets this month, great news for borrowers with all levels of equity or deposit.

“Our data shows there is further cause for positivity as both the overall average two- and five-year fixed rates have fallen. At 2.55% the average two-year fixed rate is at its lowest since February (2.53%), while the average five-year rate at 2.78% is the lowest since April (2.77%). Although the two-year overall rate is 0.06% above its equivalent rate from a pre-pandemic July 2019, the five-year overall average rate is 0.07% below its equivalent two years on (2.85%) and could indicate lenders are moving to price longer-term fixed rates more competitively, perhaps reflecting a shift in borrower focus to locking in for stability in these uncertain times.

First-time buyers and those considering a mortgage at higher LTVs are amongst those to benefit the most from rate cuts, with the average two- and five-year fixed rates at 90% LTV falling by 0.15% and 0.08% respectively, while at 95% LTV reducing by 0.09% and 0.06%, respectively, but equally it is impossible to ignore the growing ranks of providers offering sub-1% deals to tempt borrowers with larger levels of equity or deposit as well.

“According to the latest Halifax House Price Index, there was a 0.5% drop in property prices, likely linked to the stamp duty holiday tapering off, but this in no way detracts from the fact that overall prices are up approximately 8.8% on a yearly basis. Demand for the very limited supply of property could remain high, as the appetite to either get onto the property ladder or for larger properties with home offices and outdoor space continues, and these borrowers could be enticed by the possible savings lower mortgage rates may bring them.

“Competition is evident across the residential mortgage sector, but there is no guarantee that rates will continue to fall, or for how long these record-low deals may be available for, therefore seeking advice to assess the best true cost deal for their own circumstances would be a wise move by any prospective borrower.”


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